As a momentous year in the financial world draws to close, some of the UK’s top fund managers reflect on the last year's events and give their predictions for what the year ahead holds.

Fund manager forecasts: 12 calls for 2012

Stuart Cowley: head of fixed income Old Mutual

Stewart Cowley, head of fixed income at Old Mutual, thinks that government intervention will continue to define financial markets next year. But warned that events ‘will tumble out of control’ unless European leaders can agree on structural reform.

There are already causalities in the struggle between the state and the market, he said. ‘Institutions are moving at a different rate to the bond market, which has used sovereign yields as a weapon to force politicians into doing what it thinks is right,’ he said.

Hopes that the European Central Bank (ECB) will ‘bail everybody out’ are misplaced as it is now ‘absolutely clear’ that it does not have the firepower. ‘We’re beyond that part of the debate now, everybody’s going to have to pay their way,’ he added.

If eurozone leaders can agree on a workable legal framework that allows for a country to leave, then he thinks European equity could be the surprise performer in 2012. For the UK, he picked small and mid-cap companies with exposure to the global economy.

‘I’m very negative on the bond market,’ he said, adding that, ‘the only positive thing about this is that government bond yields will rise’.

But he warned that investors should be aware of ‘trigger points’ in the eurozone crisis, such when Italy starts buying its own debt or when Greek bond maturities are scheduled to roll over between Christmas and the new year.

Leave a comment!

Chris Rice: head of pan-European equities at Cazenove Capital

Chris Rice, head of pan-European equities at Cazenove Capital, thinks the UK’s austerity measures will fail to get the economy growing.

Rice said that with households deleveraging and cuts to government spending, Britain needs an enormous increase in demand from companies or from outside the UK to stave off recession.

‘But demand from our biggest trading partner, Europe, is effectively negative and companies are fearful of consuming because they don’t know what’s going to happen,’ the manager added.

Instead, Rice suggested that devaluing the pound through more quantitative easing (QE) is the only available path to recovery.

‘Terms of trade will collapse as it becomes more expensive to go abroad. We will all get poorer as import inflation will remain consistently higher than wage inflation,’ he said.

According to Rice, more QE will broaden the monetary base in the short term but will not get into the real economy. This will build up into a ‘nuclear bomb’ in the system that will be released once a recovery begins, forcing up prices even further.

Speaking before the last week’s eurozone fiscal deal, he gave Germany two options. To step backwards and leave the union, a legally more straightforward option than allowing a weaker state to break away, or to leap forward and head up a tighter political and economic union.

A German exit would cause a returning Deutschmark to become an enormous safe haven ‘killing exports for a generation, that’s why Germany’s political elite want to leap forward,’ he said.

He predicted that leaders would announce a timetable next year for a treaty change, ‘which will be for more European integration’.

Germany, the continent’s strongman, would then allow the ECB to buy enough sovereign debt to instil confidence in the markets, rather than announce the unlimited purchase of southern European bonds.

His one year predication was that the FTSE will have reached 5,500, be ‘stuffed full of Russain miners and growth stocks,’ and that European markets would be up 15%. However, he did think that at least one country will have left the single currency in three years’ time.

He advised to be ‘very long emerging markets’, but warned that ‘it’s the price you buy an asset that’s important, not the 30-year to 40-year expectations. There is zero correlation between GDP growth and stock market return’.

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Trevor Greetham: director of asset allocation at Fidelity

According to Trevor Greetham, director of asset allocation at Fidelity, we are in round two of the 2008 financial crisis and European politicians are losing the fight.

‘They are addressing the problem through deeper austerity in the periphery countries; but while austerity in the long run feels right, in the short term it forces bond yields higher,’ said Greetham.

‘People make the mistake of thinking about nations as if they’re households when they are more like a business. Sometimes businesses have to spend money to make money,’ he added.

While he is in favour of reigning in objective costs like pensions, without massive infrastructure spending he thought the UK is heading into a nasty downturn.

‘The big problem is private sector debt, not public sector. If the private sector isn’t paying it down then the government can’t pay its debt down and you end up in a Japan trap,’ he said.

When German Chancellor Angela Merkel’s challenged Greece over its continued membership of the eurozone in November, a subject previously taboo, markets began to seriously contemplate a break-up of the union.

According to Greetham, the markets want an institution with a ‘big, unlimited balance sheet’ to support southern Europe unconditionally. But he said that the ECB cannot do this as ‘under the current structure as [the periphery countries] will just go on a spending spree’.

While he predicted that the eurozone would survive intact for at least a year, he imagined a scenario of full political union which enjoys unconditional support from the ECB, but only ‘after you’ve sliced off the countries that won’t play the game’.

‘It’s a binary situation from an investment view. If we don’t solve the problem in Europe, then the FTSE will be 4050 in a year and gold will be down 750 versus the dollar. But if we can get a V-shaped recovery out of the way, the FTSE should hit 6500,’ he said.

Leave a comment!

Ian Spreadbury, who manages Fidelity’s £785.8 million Strategic Bond and the £2.5 billion MoneyBuilder Income funds, thinks that safe havens will be harder to find in 2012 and expects poor returns from government paper.

He said developed economies are facing ‘several years of painful de-leveraging’ as damaged sovereign credit quality feeds back into the real economy through the financial system.

With UK government debt yielding just 2.13% on a 10 year Gilt, just 0.1 percentage points above German bunds, Spreadbury does not expect strong returns from government paper in the medium term and thinks that gilts may soon lose their safe haven status.

He was more positive on the value of blue chip corporate debt and the high yield market, but warned that investors must be good stock pickers as ‘dispersion will be high’.

‘The key to successful navigation of bond markets next year will be to remain flexible and well diversified,’ he concluded.

Leave a comment!

David Simner: manager of the Fidelity Euro Corporate Bond fund

Fidelity portfolio manager David Simner, who runs the group’s Euro Corporate Bond fund, said Europe’s fiscal tightening and the continued uncertainly around the sovereign debt crisis will leave the eurozone vulnerable to external shocks in 2012.

‘As a result I expect the European Central Bank (ECB) to lower its main interest rate in Q1 2012. The market turmoil will also start to hit the core countries, causing more compression between peripherals and non-peripherals,’ he said.

GDP forecasts for the eurozone will worsen, he said, prompting inflation slow to 1.7% year-on-year in 2012, compared with their earlier 2012 forecasts of 2%. ‘There also remains a tail-risk that quantitative easing in non-eurozone countries could fuel higher inflation in Europe,’ he added.

According to Simner, banks deleveraging their balance sheets will add to the slowdown, creating an environment in which cyclical sectors are likely to underperform.

Leave a comment!

Andy Weir: manager of the Fidelity inflation-linked bond fund

Andy Weir, who runs Fidelity’s inflation-linked bond fund, thinks that despite sustained volatility in the bond market, demand for yield will drive investors into the fixed income asset class next year.

According to Wier, Europe’s debt hangover will continue to drive economic policy going into 2012 as central banks try to stimulate growth with low interest rates and a high level of monetary support.

Local and global inflationary pressures should be a concern for investor despite showing signs of cooling, as ‘developed market central banks continue to expand their quantitative easing programmes and reverse this trend’.

As a result he expects ‘inflation-linked bonds to outperform in this environment going forward’.

Leave a comment!

Alec Letchfield, who runs a UK focus fund for HSBC Global Asset Management, sees a future dominated by emerging market consumers and industrialists while western firms will increasingly benefit from this growth.

While European firms sit on healthy balance sheets, their investment confidence sapped by uncertainty, a combination of inflation, industrialisation and a more supportive economic environment will benefit emerging market equities.

‘This will favour physical assets like property and commodities. A positive supply and demand picture also supports the outlook for commodities. We believe as global emerging markets continue to grow there will be greater spending on domestic infrastructure,’ said Letchfield.

Greater personal wealth will feed into higher levels of domestic consumption, ‘reducing the long-standing dependence on exports and increasingly make emerging markets the guardians of their own destiny,’ he said.

Leave a comment!

Rob Burnett: Neptune’s investment director and head of European equities

Rob Burnett, who oversees Neptune’s European equity funds, has spent the year watching the beleaguered continent’s periphery debt crisis spread into the core despite the best efforts of eurozone politicians.

The Swiss government’s response to market pressure, by pegging the Swiss franc to the euro, was ‘unconventional’ according to Burnett. But he expects the trend to continue in 2012 as more ‘governments refuse to accept market prices that they do not like’.

He said that next year will be the ‘last stand’ for Europe’s sovereign default risk; politicians must finally consider fiscal union and quantitative easing by the European Central Bank.

‘We assume an attempt to launch a fiscal union will come first and if the deflation risk continues to intensify, then quantitative easing could be considered second,’ said Burnett.

His global outlook next year was for a ‘managed recession’ in Europe, while emerging markets make their way through a mid-cycle slowdown and the US posts steady growth in the first half the Presidential election year.

Japan was hit by a trio of disasters in March this year. The earthquake, tsunami and nuclear power crisis halted steady economic improvement in early 2011, but Japanese markets had mostly recovered by the third quarter according to Taylor.

Political gridlock is likely to remain a feature Japanese life in 2012, after a year of instability which saw ruling Democratic Party of Japan (DPJ) change leaders in August.

In this environment, Taylor predicted a subdued economy and a weakened Yen in response to deteriorating national finances and further currency intervention.

‘We believe earnings for the year ending 31 March 2012 will consist of two differing halves, the first half will be hit by all the one-offs associated with the triple disasters and Thai floods, the second half will see recovery from the formerly depressed level and some growth based on expanding non-OECD sales,’ he concluded.

Leave a comment!

Robin Geffen, CEO of Neptune, has been watching the Russian market ride a torrid year of volatility in global equities.

He said that despite positive trends from rising oil process at the start of the year, Russia began to underperform as the risk of a US recession and European debt crisis took its toll.

‘That said, as rising tensions in the Middle East and hopes for a solution to Europe’s debt woes pushed up oil prices and broader risk assets in the fourth quarter, Russia has bounced back strongly, clawing back much of the year’s earlier losses,’ he added.

Geffen thought that the Russian Index, trading on a lowly 4.9x earnings and 0.8x book value, ‘offers a compellingly cheap way to access a rebound in emerging market-led global growth in 2012.’

Demand also looks strong for Russia’s vast natural resources, as US growth exceeds depressed expectations and tension in the Middle East continues.

‘Moreover, as China moves into monetary easing mode in 2012 this will see improving momentum in the Chinese economy, a key consumer of Russia’s abundant natural resources,’ he said.

Recent political instability was not a concern for Geffen, who predicted that Putin’s ruling United Russia party will be keen to support real income growth ahead of the presidential elections in March 2012.

‘The administration’s stated goal is to target infrastructure and social housing, and election year will merely reinforce this,’ he concluded.

Luciano Diana: Pictet Clean Energy fund

The UK government has already halved subsidies for solar power this year and a recession in the eurozone, currently the biggest market for renewable energy, looks increasingly assured.

‘Europe is cutting back on subsidies for solar and wind energy, a lot of companies are getting out of this space as electricity is cheap and prices for carbon credits are crashing,’ said Diana.

But his fund has consistently managed to avoid the worst of the falls that have plagued the renewable energy sector. Diana attributes this performance to a balanced portfolio that is evenly split between the themes of renewable energy, natural gas and energy efficiency.

He has also limited his exposure to the eurozone, currently at 25%, positioning 50% of the fund in US equities and the rest in emerging markets.

Renewable energy will play a diminishing role in the fund next year, instead he outlined a renewed focus on energy infrastructure and natural gas (particularly the pipelines needed for by-products such as natural gas liquids).

‘There has been a build-up of demand and a lot of capital expenditure to go into infrastructure on the electricity side. The US has around $60 billion (£38.6 billion) to spend on this in the next five years. Around 20% of the fund is in natural gas infrastructure and a lot of companies are continuing to build the network that connects the resource,’ he said.

Leave a comment!

Edward Trevillion: head of real estate research at Scottish Widows Investment Partnership (SWIP)

The secondary property market will become increasingly attractive as capital growth in central London starts to slow next year, according to Edward Trevillion head of real estate research at Scottish Widows Investment Partnership (SWIP).

He calculated that yield compression in residential central London was close to peaking and rents are likely to decline slowly in the rest of the UK.

The investment firm forecasted UK GDP to grow by 1% this year and by the same amount next year. ‘The issue is whether we will see a second quarter of negative growth within that 1%,’ he said.

‘At the moment we are still a bit circumspect about the effects of anything happening in the eurozone, it’s going to be a slow growth environment wherever you are,’ he added.

If the treaty negotiations completely break down though, prime London ‘safe haven’ property will benefit but some commercial holdings, such as the banking sector, will be hit by a pullback in rents.

Leave a comment!

Stuart Cowley: head of fixed income Old Mutual

Stewart Cowley, head of fixed income at Old Mutual, thinks that government intervention will continue to define financial markets next year. But warned that events ‘will tumble out of control’ unless European leaders can agree on structural reform.

There are already causalities in the struggle between the state and the market, he said. ‘Institutions are moving at a different rate to the bond market, which has used sovereign yields as a weapon to force politicians into doing what it thinks is right,’ he said.

Hopes that the European Central Bank (ECB) will ‘bail everybody out’ are misplaced as it is now ‘absolutely clear’ that it does not have the firepower. ‘We’re beyond that part of the debate now, everybody’s going to have to pay their way,’ he added.

If eurozone leaders can agree on a workable legal framework that allows for a country to leave, then he thinks European equity could be the surprise performer in 2012. For the UK, he picked small and mid-cap companies with exposure to the global economy.

‘I’m very negative on the bond market,’ he said, adding that, ‘the only positive thing about this is that government bond yields will rise’.

But he warned that investors should be aware of ‘trigger points’ in the eurozone crisis, such when Italy starts buying its own debt or when Greek bond maturities are scheduled to roll over between Christmas and the new year.

Stuart Cowley: head of fixed income Old Mutual

Stewart Cowley, head of fixed income at Old Mutual, thinks that government intervention will continue to define financial markets next year. But warned that events ‘will tumble out of control’ unless European leaders can agree on structural reform.

There are already causalities in the struggle between the state and the market, he said. ‘Institutions are moving at a different rate to the bond market, which has used sovereign yields as a weapon to force politicians into doing what it thinks is right,’ he said.

Hopes that the European Central Bank (ECB) will ‘bail everybody out’ are misplaced as it is now ‘absolutely clear’ that it does not have the firepower. ‘We’re beyond that part of the debate now, everybody’s going to have to pay their way,’ he added.

If eurozone leaders can agree on a workable legal framework that allows for a country to leave, then he thinks European equity could be the surprise performer in 2012. For the UK, he picked small and mid-cap companies with exposure to the global economy.

‘I’m very negative on the bond market,’ he said, adding that, ‘the only positive thing about this is that government bond yields will rise’.

But he warned that investors should be aware of ‘trigger points’ in the eurozone crisis, such when Italy starts buying its own debt or when Greek bond maturities are scheduled to roll over between Christmas and the new year.

Chris Rice: head of pan-European equities at Cazenove Capital

Chris Rice, head of pan-European equities at Cazenove Capital, thinks the UK’s austerity measures will fail to get the economy growing.

Rice said that with households deleveraging and cuts to government spending, Britain needs an enormous increase in demand from companies or from outside the UK to stave off recession.

‘But demand from our biggest trading partner, Europe, is effectively negative and companies are fearful of consuming because they don’t know what’s going to happen,’ the manager added.

Instead, Rice suggested that devaluing the pound through more quantitative easing (QE) is the only available path to recovery.

‘Terms of trade will collapse as it becomes more expensive to go abroad. We will all get poorer as import inflation will remain consistently higher than wage inflation,’ he said.

According to Rice, more QE will broaden the monetary base in the short term but will not get into the real economy. This will build up into a ‘nuclear bomb’ in the system that will be released once a recovery begins, forcing up prices even further.

Speaking before the last week’s eurozone fiscal deal, he gave Germany two options. To step backwards and leave the union, a legally more straightforward option than allowing a weaker state to break away, or to leap forward and head up a tighter political and economic union.

A German exit would cause a returning Deutschmark to become an enormous safe haven ‘killing exports for a generation, that’s why Germany’s political elite want to leap forward,’ he said.

He predicted that leaders would announce a timetable next year for a treaty change, ‘which will be for more European integration’.

Germany, the continent’s strongman, would then allow the ECB to buy enough sovereign debt to instil confidence in the markets, rather than announce the unlimited purchase of southern European bonds.

His one year predication was that the FTSE will have reached 5,500, be ‘stuffed full of Russain miners and growth stocks,’ and that European markets would be up 15%. However, he did think that at least one country will have left the single currency in three years’ time.

He advised to be ‘very long emerging markets’, but warned that ‘it’s the price you buy an asset that’s important, not the 30-year to 40-year expectations. There is zero correlation between GDP growth and stock market return’.

Trevor Greetham: director of asset allocation at Fidelity

According to Trevor Greetham, director of asset allocation at Fidelity, we are in round two of the 2008 financial crisis and European politicians are losing the fight.

‘They are addressing the problem through deeper austerity in the periphery countries; but while austerity in the long run feels right, in the short term it forces bond yields higher,’ said Greetham.

‘People make the mistake of thinking about nations as if they’re households when they are more like a business. Sometimes businesses have to spend money to make money,’ he added.

While he is in favour of reigning in objective costs like pensions, without massive infrastructure spending he thought the UK is heading into a nasty downturn.

‘The big problem is private sector debt, not public sector. If the private sector isn’t paying it down then the government can’t pay its debt down and you end up in a Japan trap,’ he said.

When German Chancellor Angela Merkel’s challenged Greece over its continued membership of the eurozone in November, a subject previously taboo, markets began to seriously contemplate a break-up of the union.

According to Greetham, the markets want an institution with a ‘big, unlimited balance sheet’ to support southern Europe unconditionally. But he said that the ECB cannot do this as ‘under the current structure as [the periphery countries] will just go on a spending spree’.

While he predicted that the eurozone would survive intact for at least a year, he imagined a scenario of full political union which enjoys unconditional support from the ECB, but only ‘after you’ve sliced off the countries that won’t play the game’.

‘It’s a binary situation from an investment view. If we don’t solve the problem in Europe, then the FTSE will be 4050 in a year and gold will be down 750 versus the dollar. But if we can get a V-shaped recovery out of the way, the FTSE should hit 6500,’ he said.

Ian Spreadbury, who manages Fidelity’s £785.8 million Strategic Bond and the £2.5 billion MoneyBuilder Income funds, thinks that safe havens will be harder to find in 2012 and expects poor returns from government paper.

He said developed economies are facing ‘several years of painful de-leveraging’ as damaged sovereign credit quality feeds back into the real economy through the financial system.

With UK government debt yielding just 2.13% on a 10 year Gilt, just 0.1 percentage points above German bunds, Spreadbury does not expect strong returns from government paper in the medium term and thinks that gilts may soon lose their safe haven status.

He was more positive on the value of blue chip corporate debt and the high yield market, but warned that investors must be good stock pickers as ‘dispersion will be high’.

‘The key to successful navigation of bond markets next year will be to remain flexible and well diversified,’ he concluded.

David Simner: manager of the Fidelity Euro Corporate Bond fund

Fidelity portfolio manager David Simner, who runs the group’s Euro Corporate Bond fund, said Europe’s fiscal tightening and the continued uncertainly around the sovereign debt crisis will leave the eurozone vulnerable to external shocks in 2012.

‘As a result I expect the European Central Bank (ECB) to lower its main interest rate in Q1 2012. The market turmoil will also start to hit the core countries, causing more compression between peripherals and non-peripherals,’ he said.

GDP forecasts for the eurozone will worsen, he said, prompting inflation slow to 1.7% year-on-year in 2012, compared with their earlier 2012 forecasts of 2%. ‘There also remains a tail-risk that quantitative easing in non-eurozone countries could fuel higher inflation in Europe,’ he added.

According to Simner, banks deleveraging their balance sheets will add to the slowdown, creating an environment in which cyclical sectors are likely to underperform.

Andy Weir: manager of the Fidelity inflation-linked bond fund

Andy Weir, who runs Fidelity’s inflation-linked bond fund, thinks that despite sustained volatility in the bond market, demand for yield will drive investors into the fixed income asset class next year.

According to Wier, Europe’s debt hangover will continue to drive economic policy going into 2012 as central banks try to stimulate growth with low interest rates and a high level of monetary support.

Local and global inflationary pressures should be a concern for investor despite showing signs of cooling, as ‘developed market central banks continue to expand their quantitative easing programmes and reverse this trend’.

As a result he expects ‘inflation-linked bonds to outperform in this environment going forward’.

Alec Letchfield, who runs a UK focus fund for HSBC Global Asset Management, sees a future dominated by emerging market consumers and industrialists while western firms will increasingly benefit from this growth.

While European firms sit on healthy balance sheets, their investment confidence sapped by uncertainty, a combination of inflation, industrialisation and a more supportive economic environment will benefit emerging market equities.

‘This will favour physical assets like property and commodities. A positive supply and demand picture also supports the outlook for commodities. We believe as global emerging markets continue to grow there will be greater spending on domestic infrastructure,’ said Letchfield.

Greater personal wealth will feed into higher levels of domestic consumption, ‘reducing the long-standing dependence on exports and increasingly make emerging markets the guardians of their own destiny,’ he said.

Rob Burnett: Neptune’s investment director and head of European equities

Rob Burnett, who oversees Neptune’s European equity funds, has spent the year watching the beleaguered continent’s periphery debt crisis spread into the core despite the best efforts of eurozone politicians.

The Swiss government’s response to market pressure, by pegging the Swiss franc to the euro, was ‘unconventional’ according to Burnett. But he expects the trend to continue in 2012 as more ‘governments refuse to accept market prices that they do not like’.

He said that next year will be the ‘last stand’ for Europe’s sovereign default risk; politicians must finally consider fiscal union and quantitative easing by the European Central Bank.

‘We assume an attempt to launch a fiscal union will come first and if the deflation risk continues to intensify, then quantitative easing could be considered second,’ said Burnett.

His global outlook next year was for a ‘managed recession’ in Europe, while emerging markets make their way through a mid-cycle slowdown and the US posts steady growth in the first half the Presidential election year.

Japan was hit by a trio of disasters in March this year. The earthquake, tsunami and nuclear power crisis halted steady economic improvement in early 2011, but Japanese markets had mostly recovered by the third quarter according to Taylor.

Political gridlock is likely to remain a feature Japanese life in 2012, after a year of instability which saw ruling Democratic Party of Japan (DPJ) change leaders in August.

In this environment, Taylor predicted a subdued economy and a weakened Yen in response to deteriorating national finances and further currency intervention.

‘We believe earnings for the year ending 31 March 2012 will consist of two differing halves, the first half will be hit by all the one-offs associated with the triple disasters and Thai floods, the second half will see recovery from the formerly depressed level and some growth based on expanding non-OECD sales,’ he concluded.

Robin Geffen, CEO of Neptune, has been watching the Russian market ride a torrid year of volatility in global equities.

He said that despite positive trends from rising oil process at the start of the year, Russia began to underperform as the risk of a US recession and European debt crisis took its toll.

‘That said, as rising tensions in the Middle East and hopes for a solution to Europe’s debt woes pushed up oil prices and broader risk assets in the fourth quarter, Russia has bounced back strongly, clawing back much of the year’s earlier losses,’ he added.

Geffen thought that the Russian Index, trading on a lowly 4.9x earnings and 0.8x book value, ‘offers a compellingly cheap way to access a rebound in emerging market-led global growth in 2012.’

Demand also looks strong for Russia’s vast natural resources, as US growth exceeds depressed expectations and tension in the Middle East continues.

‘Moreover, as China moves into monetary easing mode in 2012 this will see improving momentum in the Chinese economy, a key consumer of Russia’s abundant natural resources,’ he said.

Recent political instability was not a concern for Geffen, who predicted that Putin’s ruling United Russia party will be keen to support real income growth ahead of the presidential elections in March 2012.

‘The administration’s stated goal is to target infrastructure and social housing, and election year will merely reinforce this,’ he concluded.

Luciano Diana: Pictet Clean Energy fund

The UK government has already halved subsidies for solar power this year and a recession in the eurozone, currently the biggest market for renewable energy, looks increasingly assured.

‘Europe is cutting back on subsidies for solar and wind energy, a lot of companies are getting out of this space as electricity is cheap and prices for carbon credits are crashing,’ said Diana.

But his fund has consistently managed to avoid the worst of the falls that have plagued the renewable energy sector. Diana attributes this performance to a balanced portfolio that is evenly split between the themes of renewable energy, natural gas and energy efficiency.

He has also limited his exposure to the eurozone, currently at 25%, positioning 50% of the fund in US equities and the rest in emerging markets.

Renewable energy will play a diminishing role in the fund next year, instead he outlined a renewed focus on energy infrastructure and natural gas (particularly the pipelines needed for by-products such as natural gas liquids).

‘There has been a build-up of demand and a lot of capital expenditure to go into infrastructure on the electricity side. The US has around $60 billion (£38.6 billion) to spend on this in the next five years. Around 20% of the fund is in natural gas infrastructure and a lot of companies are continuing to build the network that connects the resource,’ he said.

Edward Trevillion: head of real estate research at Scottish Widows Investment Partnership (SWIP)

The secondary property market will become increasingly attractive as capital growth in central London starts to slow next year, according to Edward Trevillion head of real estate research at Scottish Widows Investment Partnership (SWIP).

He calculated that yield compression in residential central London was close to peaking and rents are likely to decline slowly in the rest of the UK.

The investment firm forecasted UK GDP to grow by 1% this year and by the same amount next year. ‘The issue is whether we will see a second quarter of negative growth within that 1%,’ he said.

‘At the moment we are still a bit circumspect about the effects of anything happening in the eurozone, it’s going to be a slow growth environment wherever you are,’ he added.

If the treaty negotiations completely break down though, prime London ‘safe haven’ property will benefit but some commercial holdings, such as the banking sector, will be hit by a pullback in rents.

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